Money Management and Sports Betting

Bankroll management is so important in sports betting. You have to treat sports betting like any other financial endeavor. It’s all about personal responsibility. It’s all about finding out what works for you. Those gambling addiction things aren’t lying when they talk about only gambling with what you can afford to lose. It isn’t a defeatist attitude to look at sports betting and consider the strong possibility that you will lose money. It’s a lot like any other form of gambling. There’s always an edge and it generally doesn’t belong to you.

That being said, there are handicappers out there that are extremely successful. Sure, they’re good at picking games or finding mathematical edges, but there’s one thing that all of them have in common. They know how to manage a bankroll. It doesn’t matter if you are just starting out as a $5 or $10 bettor or somebody established in the industry playing $10,000 or $20,000 on a game. Being responsible with a bankroll is non-negotiable. It is essential to being a good handicapper. You can pick winners 60 percent of the time, but if you’re not mindful of simple bankroll management techniques, you might still lose money.

Like everything else in handicapping, there are different ways of going about bankroll management. We’ll discuss a few strategies here, ranging from very simple to a little bit more complex and complicated. What works for you may not work as well for somebody else, but the end goal should always be the same. When you beat the vig, you need to show a profit. We’ll start with the basics and go from there.

Flat Betting: Flat betting is simply betting the same amount on every game. This can be hard for a lot of people because they often believe that they have a stronger opinion on one game than another. For those just starting out with a limited bankroll, maybe only that one strong opinion should be played as opposed to both of them.

Let’s say you have a bankroll of $100. How much are you comfortable betting? Do you have the ability to replenish your account if you go broke? How much would depositing another $100 hurt you financially? These are all considerations. Some sportsbooksoffer limits as low as $1. Others have a limit of $5 per wager. Most handicappers that you talk to will advocate around three percent of your bankroll per wager as a standard unit size.

There are two different philosophies behind flat betting. One is a conservative, mostly risk-averse approach. You’re not betting a high volume of games and may have three or four games per night across the NHL, NBA, and college basketball. Maybe you have three or four games on a college football Saturday and two or three games on an NFL Sunday. With flat betting, you are simply betting the same amount on every game and you’re hoping to be above the 52.38 percent break-even rate at a vig of -110 to show a profit. You’re taking what you believe to be larger edges by betting games you have the highest confidence in and hoping to gain profits that way.

For most novice bettors starting out, this is the best approach to take. It’s the simplest approach and provides the least amount of exposure to your bankroll. If you win 50 percent of your games, you’re only losing the juice, which would be about 10 cents on the dollar on every standard -110 bet.

The other philosophy behind flat betting is used by high-volume bettors. Lots of edges in a large number of games would add up to bigger wins. High-volume players may deviate slightly here and there on “bigger” plays, but, more often than not, the edges are going to be grouped into a standard unit size. A high-volume player may have 12 to 15 plays a night across the daily winter sports and also have 10 to 12 plays on a college football Saturday. Almost all of those bets will have the same unit size. When it comes to volume, the idea of needing to win three bets to make up for one lost bet isn’t appealing. As a result, a lot of high-volume bettors will pick a unit size and stick with it until their bankrolls are big enough to justify an increase. After that, they will pick a new bet size and stick with it.

Let’s look at an example. Let’s say you have a bankroll of $200 and have decided to use $5 as your standard unit size. In this instance, $5 is a little bit less than three percent, but that’s what you feel comfortable with. To make the math easy, each example bet will be 1.1 units on the standard -110 juice. That way, you bet 1.1x to win 1x rather than 1x to win .909x.

Let’s say that this is your card for February 1, 2017:

NBA: Minnesota +6 (LOSS; $5.50 to win $5; -1.1x)

NBA: Indiana -2.5 (WIN; $5.50 to win $5; +1x)

CBB: Drake +16.5 (WIN; $5.50 to win $5; +1x)

CBB: USC -1.5 (WIN; $5.50 to win $5; +1x)

Results: Units risked: 4.4; Units won: 3; Units lost: 1.1

Your profit for the night is $9.50, or 1.9 units (5.5 * 1.9)

Think about if you had put two units on that Minnesota play and bet $11 to win $10. Your profit for the night would be just $4, or not even one full unit, even though you went 3-1 on your picks. You would have only made 0.8 units because of the increased bet size.

The Sliding Scale: Many handicappers that sell picks in the industry are going to have a sliding scale that they recommend. This is something that all bettors can adopt if they want. Certainly you’ve heard of 3* plays or a “three-dime bet” or a “five-star Game of the Week”. There’s a certain marketing element to the industry, as we all know, but these are often games that handicappers have a stronger opinion about. It’s going to happen. You’re going to find a game that you absolutely love. Your plan is going to be to “load up” on that game.

This takes a bankroll and an understanding of how the industry, break-even percentages, and the vig work. You have to understand that “stepping out” to make a 5x play on a five-star Game of the Week presents certain challenges. This is a more aggressive approach to bankroll management. For some, it works. Those are generally people that don’t bet a large number of games per day or per weekend.

Some sites will do this based on a “star rating”. One star is your standard bet amount. Three stars would be three times that amount. Five stars would be five times that amount. In terms of your personal handicapping, you have to weigh the risk-reward of putting five times the amount on one play. If you are a $5 bettor with a $100 bankroll and you want to put $25 in play on one game, that’s a significant chunk of your available funds. If you are a $3 bettor following the three percent rule, a 15 percent investment is about the max that most would recommend on one game and that’s even pushing it. Obviously, you have to consider the ramifications of losing 15 percent of your bankroll. How it limits you with future wagers. How it could force you into depositing more funds. On the other hand, we all look at slot machines thinking about winning the big money and not the 3x line for three cherries.

One thing to be cognizant of with a sliding scale is that you should always turn a profit with a 2-1 night. That’s why a 2-3-4 or a 3-4-5 scale works. If you win the 2x and 3x wagers, you’ll have something to show for it with a 4x loss. Similarly, winning a 3x and 4x can soften the blow from losing a 5x. You don’t want to have something like a 2x, 5x, 10x scale, where two wins still create a three-unit loss if the 10x fails.

As you get more comfortable at picking and choosing your spots, you’re going to find those games that stand out. Always be mindful of just how much your big plays count towards your overall bankroll and bet something that is responsible that you can afford to lose.

Kelly Criterion: This is where we start to elevate our bankroll management vocabulary. The Kelly Criterion is mathematical approach to determining what amount to bet based on your perceived advantage. There is a formula for this:

Let’s say that you have a model. You put in all of the pertinent information that your model needs to calculate an expected outcome. In a given sporting event, the model suggests that the Miami Beach Flamingos are a 65 percent favorite (which would imply a line of -185) to win over the Ocean City Hermit Crabs in a minor league baseball game. The actual line on the game is Miami Beach -120. The decimal odds of -120 are 1.83.

Probability: .65

Decimal Odds: 1.83

Our equation is then:

(.65 * 1.83) – 1 / (1.83 – 1)

(1.1895 – 1) / .83

.1895 / .83 = .228313

According to the Kelly Criterion in this example, your optimal bet size would be 22.83 percent of your bankroll with a 65-cent line advantage.

Let’s look at an example using point spreads and basketball. The Ashtabula Aardvarks are listed as a 2.5-point favorite against the Grove City Geese in NBA D-League action. The standard money line for a 2.5-point favorite is somewhere in the -140 range. Your numbers, however, have Ashtabula favored by five points, which is more like a -215 money line. A -215 money line implies a 68.25 percent probability of winning. The Decimal Odds of the -140 line are around 1.71.

Our equation is:

(.6825 * 1.71) – 1 / (1.71 – 1)

(1.167075 – 1) / .71

.167075 / .71 = .23531

According to the Kelly Criterion, your optimal bet size would be 23.53 percent of your bankroll.

That may seem crazy and, to be honest, it is a bit over the top. As a result, most bettors that subscribe to the Kelly theory of bankroll management often play more like “quarter Kelly” at 2.5 percent, which, in this case, would be 5.88 percent of your bankroll (.2353 *.25). The risk of ruin betting 23.53 percent of your bankroll on one single edge of 2.5 points is pretty high, so most people modify the calculations to limit risk, but still look to capitalize on big advantages.

This is a more advanced, aggressive approach. It can be done and there are plenty of odds converters out there to get the money line to percentage calculations and also the American odds to the Decimal odds. Be very careful using this type of money management system. The full investment of the Kelly Criterion can be applied with casino games like blackjack when there is perceived to be a significant edge or with the stock market. In sports betting, limiting exposure by using a fraction of the Kelly Criterion can be a worthwhile endeavor.

Martingale System: If you’re looking for a cautionary tale with betting systems, look no further than the Martingale System. This is a system that is mostly applied to casino games, but you can bet that somebody out there has applied it to sports betting. The system itself is rather simple.

Each time you win, you keep the same bet amount. Each time you lose, you double your bet amount, assuming that you will win at some point and get your money back and then some! It sounds great, right?! Well, it’s also a pretty good way to go broke because what if you don’t win before you run out of money?

Let’s look at this in practice, assuming a $100 bankroll and a 5% unit size, where you bet 1.1x to win 1x:

Bet 1: $5.50 to win $5 (LOSS) ($94.50)

Bet 2: $11.00 to win $10 (WIN) ($104.50)

Bet 3: $5.50 to win $5 (LOSS) ($99)

Bet 4: $11 to win $10 (LOSS) ($88)

Bet 5: $22 to win $20 (WIN) ($108)

Bet 6: $5.50 to win $5 (WIN) ($113)

Bet 7: $5.50 to win $5 (LOSS) ($107.50)

Bet 8: $11 to win $10 (LOSS) ($96.50)

Bet 9: $22 to win $20 (LOSS) ($74.50)

Bet 10: $44 to win $40 (LOSS) ($30.50)

If you started with a $100 bankroll and the Martingale system, you no longer have enough money to follow it. In 10 bets, you’ve lost over 70 percent of your bankroll by losing seven out of 10 bets.

The bankroll required to play the Martingale system is much bigger than your standard bankroll because of how the bet sizes increase with each loss. Every form of betting has some house edge built into it, so you are expected to lose over the long-term. That’s not pessimism, that’s probability. The Martingale system can be profitable in the short-term, but, oftentimes, you will lose and lose badly in the long-term.

Had you been flat betting, it would have looked like this:

Bet 1: $5.50 to win $5 (LOSS) ($94.50)

Bet 2: $5.50 to win $5 (WIN) ($99.50)

Bet 3: $5.50 to win $5 (LOSS) ($94)

Bet 4: $5.50 to win $5 (LOSS) ($88.50)

Bet 5: $5.50 to win $5 (WIN) ($93.50)

Bet 6: $5.50 to win $5 (WIN) ($98.50)

Bet 7: $5.50 to win $5 (LOSS) ($93)

Bet 8: $5.50 to win $5 (LOSS) ($87.50)

Bet 9: $5.50 to win $5 (LOSS) ($82)

Bet 10: $5.50 to win $5 (LOSS) ($76.50)

You can still live to fight many more days.

Figuring out which bankroll technique works for you requires an honest assessment of the size of your bankroll, what you hope to achieve, and what you can afford to deposit if you go broke. There are other strategies out there and other means of money management, but these are a good starting point to evaluate what works for you and what doesn’t.